Vilsack: Cuba deal a boon for U.S. farmers

CHICAGO — U.S. Agriculture Secretary Tom Vilsack said reforms announced today by President Barack Obama will make it make easier to sell U.S. farm products to Cuba.

“What this particular opportunity creates is a much more efficient, less-expensive opportunity for Cuba to buy American agricultural products,” Vilsack told POLITICO on the sidelines of the U.S.-China Joint Commission on Commerce and Trade meeting.

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“In the past, when Cuba was purchasing product, they had to pay cash in advance. They had to route the cash through a third party because we couldn’t allow direct transactions between American banks and Cuban banks,” Vilsack explained following a session in which he was a presenter.

The U.S. has allowed agricultural exports to Cuba since 2001 under the Trade Sanctions Reform and Export Enhancement Act. In 2013, the U.S. exported just shy of $350 million of agricultural goods to Cuba, with frozen chicken, corn, soybeans and soybean meal, as the top products, according to the U.S.-Cuba Trade and Economic Council. Chicken represented nearly half the value, with $144 million in sales. Canned foods, frozen sausages and frozen pork were also among the top 10 products.

But farm exports to Cuba have fluctuated over the past several years, going as high as $710 million in 2008 after starting off with only $4.3 million in exports in 2001, when trade ties between the U.S. and Cuba were partially liberalized.

Agricultural trade has been limited by several regulatory and financial hurdles that the Obama administration is aiming to eliminate, including restrictions on cash transactions.

“Those barriers are being removed, so now [the Cubans] can pay as everyone else pays when the product is in transit and you don’t have to go through a third party,” Vilsack explained, noting how an American and Cuban banks “can deal directly with each other.”

By significantly reducing the cost of the transactions, “it’s more likely now that Cuba will be able to do business at a higher level, from an agricultural product perspective,” Vilsack said.

The biggest agricultural winners from the Cuba announcement will be farmers in the Southeastern states. They can easily ship products like poultry, rice and corn to Cuba, which is just a few hundred miles away. As of 2006, a full quarter of Alabama’s agricultural revenue came from exports to Cuba, including sales of catfish, soybeans and poultry.

Other leading states exporting to Cuba include Georgia, Arkansas, Texas, North Carolina and Mississippi, with most products funneling through Louisiana, Florida or Virginia ports.

The USA Rice Federation has been pressuring the U.S. government, along with other agriculture groups, to normalize trade with Cuba, said President and CEO Betsy Ward, who noted her group has been doing trade missions in the country for more than a decade.

“The Cuban people are great consumers of rice, and although the U.S. has sold no rice to the country since 2008, Cuba is expected to import 450,000 metric tons this marketing year,” Ward said. “This could once again become an important market for us.”

The easing of financial restrictions will help U.S. producers contend with Canada and the European Union, which do not have to jump over the same hurdles.

“These things have stood in the way of being more competitive,” said Dave Salmonsen, senior director for congressional relations at the American Farm Bureau Federation.

However, Bill Reinsch, president of the National Foreign Trade Council, said that while the U.S. agricultural sector could stand to gain significant benefits from the relaxing of trade restrictions, the boom may not come quickly.

“There will be some winners, but temper that with the fact that this is an economy that is not in very good shape,” Reinsch said. “They don’t have very much money, so I don’t expect some commercial bonanza.”